Caribbean Region: Review of Economic Growth and ... - USITC

Trade-induced economic growth is often associated with reductions in poverty, although theevidence is less strong for reduction in the gap between rich and poor (income inequality).The literature suggests that Caribbean countries could improve efficiency by reducing theirexternal tariffs and shifting to nontariff sources of government revenue, such as a valueaddedtax, and by strengthening regional trade negotiating capacity and regional integrationunder the Caribbean Single Market Economy.U.S. policies can stimulate Caribbean services exportsThe literature suggests that changes in U.S. policy could encourage services exports fromthe region. Services are an important part of Caribbean economies, and services oftenconstitute relatively high-wage production in the region. Relaxing certain U.S. regulations,such as local presence requirements, could aid Caribbean exporters of professional services,while greater portability of U.S. private and public health insurance benefits could helpCaribbean providers of health and wellness services. For example, permitting Caribbeanbasedbanks to establish deposit-taking branches in the United States would not onlystrengthen the Caribbean banking sector, but could also spur investment in the region.Overcoming Vulnerability Through DiversificationSome Caribbean-based companies have taken steps to expand and diversify into a broader range ofindustries and reduce vulnerabilities associated with concentration on a single market or product. JamaicaBroilers Group expanded from a small broiler meat producer into, among others, veterinary and nutritionalservices, prepared foods, feed ingredients, and ethanol. GraceKennedy (diversified firm in Jamaica)expanded from a shipping company into processed foods and distribution services, and financialinvestment services. Demerara Distillers (Guyana) used its core rum business to expand into a variety ofbeverages, distribution services, and seafood processing.CBERA has generally increased growth despite preference erosionAnalyses of CBERA generally find that the program has contributed to economic growth,despite gradual preference erosion due to increased number of U.S. free trade agreementsand reductions in MFN rates. Increasing utilization of preferences has stimulated investmentand growth in the beneficiary countries. The literature notes that much of the benefit is tiedto apparel preferences under the CBTPA. While these benefits may have diminished sincethe expiration of the WTO Agreement on Textiles and Clothing in 2005, U.S. apparelimports from a few countries in the region, particularly Haiti, remain important to theireconomies. CBERA preference programs have provided more limited benefits to nonapparelexporters, though some have benefited from preferences for ethanol, tuna, and petroleumexports. The literature notes that the United States could further enhance Caribbeandevelopment by improving CBERA’s sectoral coverage and duration, and by liberalizingCBERA’s rules of origin to allow fabric inputs from additional non-U.S. sources.xxi